Answer:
effective interest rate = 4.75 %
Explanation:
given data
principal = $108,000
time = 8 months = [tex]\frac{8}{12}[/tex] year
rate = 10%
solution
we get here first interest that is
interest = principal × rate × time .................1
put here value
interest = $108,000  × 10% × [tex]\frac{8}{12}[/tex]
interest = $7200
so here effective interest rate will be here as
effective interest rate = [tex]\frac{interest}{principal- interest}[/tex] × time  ...........2
put here value
effective interest rate = [tex]\frac{7200}{108000-7200}[/tex]  ×  [tex]\frac{8}{12}[/tex]
effective interest rate = 0.04761
effective interest rate = 4.75 %
